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Exempt or Not Exempt?
The Fair Labor Standards Act (FLSA)
Background and Purpose
The Fair Labor Standards Act (FLSA) is a U.S. Federal Law enacted in 1938 to prohibit
employers from taking advantage of employees. It includes provisions which:
Prohibit child labor
Set minimum wage
Require overtime pay
Require equal pay (prohibit sex based wage differentials)
Require record keeping
The FLSA is an Employee Protection Act whereby employees are generally presumed not
exempt and entitled to overtime pay; however there are exemptions from this law for executive,
administrative, professional, and computer employees. The law requires that employees be
paid for overtime hours worked at a rate of 1 ½ times their regular rate of pay (unless the
employee is exempt from the provision). Overtime is defined as more than 40 hours worked in
a work week. It requires significant record keeping for compliance. Employees may be exempt
from this law if they meet 3 tests in regard to:
1. Salary Level
2. Salary Basis
3. Job Duties
The FLSA was updated in 2004.
The information below is designed to assist you in determining whether an employee is exempt
from the FLSA.
Test 1: Salary Level
The employee must be paid at least $455 per week or $910 biweekly or $1971.66 monthly or
$23,660 annually. These amounts are actual payments and salary should not be pro-rated for
part-time employees.
Test 2: Salary Basis
Employee must receive a predetermined, fixed salary that is not subject to reduction due to
variations in quality or quantity of work performed (except for some very narrow specified
circumstances).
Test 3: Job Duties
Employee must meet all of the criteria specified in one or more of the following exemptions:
Executive
Administrative
Education Establishments and Administrative
Professional – Learned
Professional – Artistic
Computer-Related
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The term “primary duty” is used throughout each of the exemptions. The definition of primary
duty is the principal, main, major or most important duty that the employee performs.
Determination of an employee’s primary duty must be based on the character of the employee’s
job as a whole. Factors to consider include relative importance of the exempt duties as
compared with other types of duties; amount of time spent performing exempt work (not more
than 20% of an employee’s time may be spent on nonexempt work); employee’s relative
freedom from direct supervision; and relationship between the employee’s salary and wages
paid to other employees for the kind of nonexempt work performed by the employee.
Employees who spend more than 80% of their time performing exempt work will generally
satisfy the primary duty requirement.
EXECUTIVE
In order for an employee to be considered exempt as an executive, all of the following 3 criteria
must be met:
1. Primary duty: manages enterprise, or customarily recognized (permanent status)
department or subdivision. Managing includes activities such as:
Interviewing, selecting, training and disciplining employees
Setting and adjusting pay and work hours
Planning and apportioning work among employees
Maintaining production or sales records
Appraising employee’ productivity and efficiency
Handling employee complaints and grievances
Determining the techniques to be used; the type of materials, supplies, machinery,
equipment or tools to be used; or the merchandise to be bought, stocked and sold
Providing for the safety and security of the employees or the property
Planning and controlling the budget
Monitoring or implementing legal compliance measures
2. Customarily and regularly direct the work of at least 2+ full-time employees (FTEs)
3. Hires or fires employees, or whose recommendations as to hiring, firing, advancement,
promotion or any other change of status of other employees are given particular weight.
Generally, an executive’s recommendations must pertain to employees whom the
executive customarily and regularly directs. It does not include occasional suggestions.
An employee’s recommendations may still be deemed to have “particular weight” even if
a higher level manager’s recommendation has more importance and even if the
employee does not have authority to make the ultimate decision as to the employee’s
change in status.
Additional Information
A common question that arises under the executive exemption is how to classify employees
who perform both exempt management duties and nonexempt duties. The regulations state
that a manager who performs both exempt and nonexempt work at the same time is not
automatically disqualified from the executive exemption. Generally, the exempt executives
themselves make the decision regarding when to perform nonexempt duties. In contrast, the
nonexempt employee generally is directed by a supervisor to perform the exempt work or
performs the exempt work for defined time periods. For example, if an assistant manager’s
primary duty is management, performing work such as serving customers, cooking food,
stocking shelves and cleaning the establishment does not preclude the exemption. An assistant
manager can supervise employees and serve customers at the same time without losing the
exemption. In contrast, a relief supervisor or working supervisor whose primary duty is
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performing nonexempt work on the production line in a manufacturing plant does not become
exempt merely because he occasionally has some responsibility for directing the work of other
nonexempt production line employees when, for example, the exempt supervisor is on vacation.
ADMINISTRATIVE
In order for an employee to be considered exempt as an administrative employee, both of the
following 2 criteria must be met:
1. Primary duty: performs office or non-manual work directly related to management or
general business operations (tax, finance, accounting, budgeting, auditing, insurance,
quality control, purchasing, procurement, advertising, marketing, public &/or government
relations, research, safety & health, human resources, labor relations, computer
network, database administration, legal & regulatory compliance, etc. Work must be
directly related to assisting with the running or servicing of the business and does not
include working on a manufacturing production line or selling a product in a retail or
service establishment.) of the employer or the employer’s customers.
2. Primary duty includes exercise of discretion and independent judgment with respect to
matters of significance and implies that the employee has authority to make an
independent choice, free from immediate direction or supervision. This involves the
comparison and the evaluation of possible courses of conduct, and acting or making a
decision after the various possibilities have been considered. Two or 3 of the following
must apply to answer “yes” to this criteria:
Authority to formulate, affect, interpret, or implement management policies or
operating practices
Carries out major assignments in conducting the operations of the business
Performs work that affects business operations to a substantial degree
Authority to commit the employer in matters that have significant financial impact
Authority to waive or deviate from established policies and procedures without prior
approval, and other factors set forth in the regulation
Authority to negotiate and bind the company on significant matters
Provides consultation or expert advice to management
Involved in planning long- or short-term business objectives
Investigates and resolves matters of significance on behalf of management
Represents the company in handling complaints, arbitrating disputes or resolving
grievances
Additional Information
Discretion and independent judgment does not include:
Applying well-established techniques, procedures or specific standards described in
manuals or other sources
Clerical or secretarial work
Recording or tabulating data
Performing mechanical, repetitive, recurrent or routine work
Employees are not exempt if they use manuals to apply well-established techniques or
procedures within closely prescribed limits.
“Matters of significance” refer to the level of importance or consequence of the work performed.
An employee does not exercise discretion and independent judgment with respect to matters of
significance merely because the employer will experience financial losses if the employee fails
to perform the job properly. Similarly, an employee who operates very expensive equipment
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does not exercise discretion and independent judgment with respect to matters of significance
merely because improper performance of the employee’s duties may cause serious financial
loss to the employer. The fact that an employee’s decisions are revised or reversed after review
does not mean that the employee is not exercising discretion and independent judgment. The
exercise of discretion and independent judgment must be more than the use of skill in applying
well-established techniques, procedures or specific standards described in manuals or other
sources.
Typical Administrative Exempt Jobs:
An employee who leads a team of other employees assigned to complete major projects
Executive assistant or administrative assistant to a business owner or senior executive
of a large business who has been delegated authority regarding matters of significance
Management consultants who study the operations of a business and propose changes
in organization
Human resource managers who formulate, interpret or implement employment policies
generally meet the administrative duties requirements
Typical Administrative Nonexempt Jobs:
Ordinary inspection work involving well-established techniques and procedures
Examiners and graders who perform work involving comparison of products with
established standards
Comparison shoppers who merely report the prices at a competitor’s store
Public sector inspectors or investigators
Personnel clerks who “screen” applicants to obtain data regarding minimum
qualifications and fitness for employment generally are not exempt administrative
employees
EDUCATIONAL ESTABLISHMENTS AND ADMINISTRATIVE
In order for an employee to be considered exempt as an administrative employee within an
educational establishment the following criteria must be met:
1. Primary duty: performs administrative functions directly related to academic instruction
or training in an educational establishment. Academic administrative functions include
operations directly in the field of education, and do not include jobs relating to areas
outside the educational field.
Additional Information
Employees engaged in academic administrative functions include:
Superintendent or other head of an elementary or secondary school system
Any assistants responsible for administration of such matters as curriculum, quality and
methods of instructing, measuring and testing the learning potential and achievement of
students, establishing and maintaining academic and grading standards, and other
aspects of the teaching program
Principal and any vice-principals responsible for the operation of an elementary or
secondary school
Department heads in institutions of higher education responsible for the various subject
matter departments
Academic counselors and other employees with similar responsibilities
Having a primary duty of performing administrative functions directly related to academic
instruction or training in an educational establishment includes, by its very nature, exercising
discretion and independent judgment with respect to matters of significance.
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COMPUTER-RELATED
In order for an employee to be considered exempt as an administrative employee, both of the
following criteria must be met:
1. If compensated on an hourly basis, at a rate not less than $27.63 an hour
2. Employed as a computer systems analyst, computer programmer, software engineer or
other similarly skilled worker in the computer field performing the primary duties
described below:
Application of systems analysis techniques and procedures, including consulting with
users, to determine hardware, software or system functional specifications
Design, development, documentation, analysis, creation, testing or modification of
computer systems or programs, including prototypes, based on and related to user
or system design specifications
Design, documentation, testing, creation or modification of computer programs
related to machine operating systems; or
Combination of aforementioned duties, performance of which requires the same level
of skills
Typical Computer-Related Nonexempt Jobs:
The computer employee exemption does not include employees engaged in the
manufacture or repair of computer hardware and related equipment.
Employees whose work is highly dependent upon, or facilitated by, the use of computers
and computer software programs (e.g., engineers, drafters and others skilled in
computer-aided design software), but who are not primarily engaged in computer
systems analysis and programming or other similarly skilled computer-related
occupations identified in the primary duties test described above, are also not exempt
under the computer employee exemption.
PROFESSIONAL - LEARNED
In order for an employee to be considered exempt as an administrative employee, all of the
following 3 criteria must be met:
1. Primary duty: performs work requiring advanced knowledge:
Predominantly intellectual in character
Includes work requiring the consistent exercise of discretion and judgment
The advanced knowledge is generally used to analyze, interpret or make deductions
from varying facts or circumstances
Not work involving routine mental, manual, mechanical, or physical work
Cannot be attained at the high school level
2. Knowledge must be in field of science or learning (Accounting, Actuarial Computation,
Architecture, Biological Sciences, Chemical Sciences, Engineering, Law, Medicine,
Pharmacy, Physical Sciences, Teaching, Theology)
3. Knowledge customarily acquired by a prolonged course of specialized intellectual
instruction. Specialized academic training is a prerequisite for entering the profession
with the best evidence that an employee meets this requirement is possession of the
appropriate academic degree.
Additional Information
The learned professional exemption is not available for occupations that may be performed with:
Only the general knowledge acquired by an academic degree in any field
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Knowledge acquired through an apprenticeship
Training in the performance of routine mental, manual, mechanical or physical
processes
The exemption also does not apply to occupations in which most employees acquire skill by
experience.
Exemption is also available to employees in learned professions who:
Have substantially the same knowledge level and
Perform substantially the same work as the degreed professionals,
But attained the advanced knowledge through a combination of work experience and
intellectual instruction
Examples:
Lawyer who did not attend law school
Chemist who does not have a chemistry degree
Typical Learned Professional Exempt Jobs:
Lawyers
Teachers
Accountants
Pharmacists
Engineers
Actuaries
Chefs
Athletic trainers
Licensed funeral directors or embalmers
Typical Learned Professional Nonexempt Jobs:
Accounting clerks and bookkeepers who normally perform a great deal of routine work
Cooks who perform predominantly routine mental, manual, mechanical or physical work
Paralegals and legal assistants
Engineering technicians
PROFESSIONAL – ARTISTIC
In order for an employee to be considered exempt as Professional – Artistic, the following
criteria must be met:
1. Primary duty: performs work requiring invention, imagination, originality or talent in a
recognized field (music, writing, acting, graphic arts) of artistic or creative endeavor.
Typical Creative Professional Exempt Jobs:
Actors
Composers
Certain painters
Cartoonists
Novelists
Musicians
Soloists
Writers
Essayists
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FLSA WORKSHEET
JOB TITLE: _____________________________________________________________ Date of Test: ________
Please answer yes or no (Y/N) to the statements below. Any no (N) answer makes the job non-exempt.
TEST 1: SALARY LEVEL
Employee’s salary greater than $455/week or $910 biweekly or $1971.66 monthly or $23,660 annually?
Y/N
TEST 2: SALARY BASIS
Employee receives a predetermined, fixed salary that is not subject to reduction due to variations in quality
or quantity of work performed?
Y/N
TEST 3: JOB DUTIES (must meet all criteria in at least 1 category below)
Y/N
Executive – All of the following 3 criteria must be met:
1. *Primary duty: manages enterprise, or customarily recognized department or subdivision
2. Customarily and regularly direct the work of at least 2+ full-time employees (FTEs)
3. Hires or fires employees, or whose recommendations are given particular weight
Administrative – Both of the following 2 criteria must be met:
1. *Primary duty: performs office or non-manual work directly related to management or general
business operations (e.g.: tax, finance, accounting, budgeting, auditing, insurance, quality control,
purchasing, procurement, advertising, marketing, public &/or government relations, research, safety
& health, personnel management, benefits, human resources, labor relations, computer network,
Internet and database administration, legal & regulatory compliance, etc.) of the employer or the
employer’s customers
2. *Primary duty includes exercise of discretion and independent judgment (authority to formulate,
affect, interpret, or implement management policies or operating practices; carries out major
assignments in conducting the operations of the business; performs work that affects business
operations to a substantial degree) with respect to matters of significance.
Educational Establishments and Administrative
1. *Primary duty: performs administrative functions (administration of such matters as curriculum,
quality and methods of instructing, measuring and testing the learning potential and achievement of
students, establishing and maintaining academic and grading standards, and other aspects of the
teaching program OR department heads in institutions of higher education responsible for the
various subject matter departments OR academic counselors and other employees with similar
responsibilities) directly related to academic instruction or training in an educational establishment.
Professional – All of the following 3 criteria must be met:
1. *Primary duty: performs work requiring advanced knowledge
2. Knowledge must be in field of science or learning (Accounting, Law, Teaching, Engineering,
Biological, Chemical or Physical Sciences)
3. Knowledge customarily acquired by a prolonged course of specialized intellectual instruction
Computer-Related – Both of the criteria listed below must be met:
1. If compensated on an hourly basis, at a rate not less than $27.63 an hour
2. Employed as a computer systems analyst, computer programmer, software engineer or other
similarly skilled worker in the computer field performing the primary duties described below:
Application of systems analysis techniques and procedures, including consulting with users, to
determine hardware, software or system functional specifications
Design, development, documentation, analysis, creation, testing or modification of computer
systems or programs, including prototypes, based on and related to user or system design
specifications
Design, documentation, testing, creation or modification of computer programs related to
machine operating systems; or
Combination of aforementioned duties, performance of which requires the same level of skills
*Primary duty: looking at the job as a whole - principal, main, major or most important reason that the job exists.
Non-exempt work can be no more than 20% of the job.